Adviser shortages could last nearly a decade

7 May 2020

It will likely take nearly a decade for financial adviser numbers to be restored to their pre-Financial Adviser Standards and Ethics Authority (FASEA) levels in circumstances where new entrants to the industry account for barely half of the advisers who have left.

That is the bottom line of research undertaken by HFS Consulting principal, Colin Williams who has compared the number of advisers who have exited the industry to those who have entered, and the bottom line is that the industry is facing an adviser shortfall which might last well beyond 2025.

Adviser exits in 2019 were 8,413 but new adviser entrants were barely 4,017, fewer than half of the exits. This compares with 2018, when the data showed that there were 8,930 new entrants to the industry compared to 6,061 exists.

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Similarly, in 2017 new recruits marginally outweighed exits with 5,410 advisers being appointed compared to 5,281 exits.

Early data for 2020 suggests that the level of exits was still significantly outstripping the number of new entrants with the picture having been made more complex by the impact of the COVID-19 pandemic and the manner in which this has impacted the sitting of the FASEA adviser examination and the delivery of financial planning degree and bridging courses.

Williams data analysis shows the private client sector has held up well compared to the broader advice market with just 553 resignations in 2019 with the superannuation sector also holding up well.

However, he noted that in terms of growth in adviser numbers, the superannuation funds did not appear to have moved to fill the void left by the exit of the major banks.




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If you want an insight into the future of financial planning in this country, all you have to do is ask a sample of asvisers the following question - would you recommend financial advice as a career option for your children or a young person who asks you for advice? I'm willing to guess 80-90% would say no, which means the profession will continue to decline indefinitely unless a drastic turnaround in regulatory policy occurs.

Agree generally as it is way tougher now.
On the subject of fewer new Advisers coming in though, does it matter? Sure there will be less professionals to service clients. So from a public point of view yeah there's an issue.
However with the loss of Advisers, and the much tighter professional credentials, we will have far fewer unqualified AFSL staff (who caused most of the problems in the past as we saw at the RC) to contend with. In my view, that's a huge positive.

I have a solution. why don't we just allow registered tax agent, and accountants to give financial advice?

shortage, I don't think so. addressed.

yep, let's do that. didn't the government just do that?

has any numbskull come and thought, hmmmm, maybe there is an issue here that we are missing if we have to get "all hands on deck" because the licensed advisers who are most appropriately qualified to give advice arent' able to do so.

i think pussy is on the money :-)

Hi All,

hypothetical question.

given large numbers of advisers, accountants, all and sundry are abandoning financial advice to the tune of only 15,000 remaining (adviser ratings estimate ).

would it be unethical for me to charge - given the next closest adviser to me is going to be 600 kilometres from me - to charge an astronomical fee ? say $600 per hour ?

I have decided, am going to hold my local community hostage and extract retribution for every little pain I have personally been subject to vis a vis a master of financial planning and FASEA exam I had to do after 20 years of faultless practice experience.

do you think the federal court judge, whom I will face up to with ASIC at the hearing against me to their assertions for charging "unfair and unreasonable fees à la std 7 of the COE " is going to dismiss the case given my client(s) would have had to incur significant expense otherwise equal to or greater than my fees, in sourcing an alternative adviser, that the judge would say i am justified in charging exorbitant fees ?

thanks for the heads up and feedback.

so happy right now.

For a young adviser, it is a scary industry. The disconnect between the theory dished up in their Uni Course versus the reality of the job. The compliance regime leaves most planners exposed to litigation.

I agree entirely. Couple that with relatively low pay, long hours and high levels of stress. It's not an attractive combination. On top of that, new entrants must complete a degree which is not transferable or relevant for any other job and at the end of all that study, they must find someone to sponsor them for a professional year. I've looked at the FASEA requirements and there is no way I would employ someone for a FY. I wouldn't even do it if they paid me!

This is a good point. One compliance slip up and that is the end of their career. Named and shamed by ASIC for all of Australia to see. I think the grads who make it through will be instantly turned off by the compliance, and come to the realisation they made the wrong career choice. The industry is more about complaiance and protecting yourself rather than helping people.

What did they expect would happen when they allowed a bunch of Academics, Bureaucrats and an Ethicist to prepare all of these requirements. None of these live or function in the real world. Don't get me wrong as I agree with raising the education standards for Financial Planners, but don't crucify long term planners due to nebulous assessments of degrees and diplomas completed, but no recognition of the ongoing PD which has been required for as long as I have been a planner.
By the way I have been a full time planner for 33 years, I have a B.Comm (Melb Uni) which covers the 8 units required, but as I completed my Dip FP in 1995 this is not recognised.
What did they expect was going to happen when they expected these long term planners who have generally been providing sound advice to their clients are then told that to keep doing what you have been doing successfully, with satisfied clients, that you need to spend exorbitant funds on courses which will not do anything as far as clients are concerned. This would all sound like a joke if it was true.

The FPA, AFA plus the rest of the associations should run a poll with their members to ask the following.
"If you could exit the business and be left debt free, sufficient capital to retire or allow you to move onto something else would you do it"
I'm willing to bet that a majority of planners and business owners would jump at the chance
- one power ball....!!.

It's not an issue for the remaining advisers, at least forthe moment. There'll the same if not more clients with less competition, no platform/product cross subsidies from structurally flawed businesses (ie banks).

However in the longer term it was these banks however were the nursery for so many new advisers who then left for the private/small sector or if you want to grow your business the cost of that development will go through the roof.

The problem will further develop come succession time, there won't be sufficient numbers to buy one of the biggest assets of these advisers.

The big part of all the RC, legs and regs brought in was to "benefit consumers". Given that the clients of planning businesses will have to fund the enormous compliance costs of this crazy situation then only the very wealthy will be able to be able to afford advice and advice fees will remain artificially high to fund useless regulations.

How this "benefits consumers" in general is lost on me.

The only conclusion that can be drawn is the system fails every participant at every level, the wealthy client who pays higher fees, the regular client who gets no advice at all, it restricts business growth for the economy and restricts adviser retirement prospects.

Yes it has succeeded in bringing about much needed change. However those that are responsible for the current system should hang their head in shame and be forced to seek a career away from any form of regulation. Complete failure.

The fact is that you simply just cannot keep relentlessly and negatively hammering away at an industry or profession for a decade or more without causing untold damage to self confidence, self esteem and mental health.
People who had a long term perspective of the value of what they do and the value of the benefit they provide to the clients who trust them have gradually lost the intrinsic reward and potentially their own self respect.
This is highly destructive behaviour from regulators and Govt and has resulted in a fractured and injured industry that has not deserved the continued persecution and attacks that have been delivered.
Whilst it is acceptable to increase the professionalism of any industry or business, it is not appropriate to do so, if it also results in the loss of good people and delivers a negative impact for the consumer.

You seem to overlook the damage experienced by customers that was exposed by the Royal Commission. There were and are good people in the advice industry but their reputations were diminished by the conduct of some who had scant regard to professionalism and good conduct. Also they were not helped by the professional bodies that were negligent in maintaining standards and competency.

No one is denying the damage caused by a minority of advisers & the "sales" culture of some licensees. That has been or is being addressed by the massive remediation programs being undertaken under the supervision of ASIC. However, an entire industry should not be punished for the sins of the few, and that is exactly what has happened. Someone mentioned that in the last 12 months, a client had to confirm they agree to pay fees 9 times! Thats beaurocracy gone mad!

so your solution is to admonish the few at the expense of everyone else in public via a royal commission, so much so, that the public and stakeholders have no confidence in anyone in the industry ?

include substantially qualified people with significant experience with unblemished records of providing service over 20 + years like me ?

You seem to think the damage experienced by a tiny minority of customers, perpetrated by a tiny minority of advisers, is justification for persecution against all advisers. It is the same principle as persecuting all Muslims for the actions of a minority of terrorists, or persecuting all African refugees for the actions of a minority of gang members. You, and your friends in ASIC, Choice, and the unions, should be ashamed of yourselves for this relentless persecution campaign against the majority of innocent advisers.

And please don't try to justify your prejudice by saying "the industry" should have done more, or the "associations" should have done more. Honest, hardworking advisers have minimal control over the industry or the associations. Their influence is at a micro level, where they make a difference by providing high quality, good value service that improves the lives of their clients. Yes, there are bad elements of the "industry" that need to be selectively reformed. Banning vertical integration would be a great start. But indiscriminate persecution of all individuals who work within an industry is just prejudicial revenge, it is not reform.

What an idiotic overly ultruistic holier than thou up your own arse comment, but what i expect from Hedware.

There are 'victims' in all industries, professions and life in general. But there has never been anywhere near the extent of persecution and over regulation, as in our profession, simply because the union run industry super has billions at stake by eliminating as many of us as possible.

If ASIC did its job properly, the myriad of mistakes, intentional misdirection which in the USA under SEC would constitute fraudulent behaviour, and irreconcilable issues within industry funds would out the entire bank scrutiny & penalties in the recent RC to shame. However if they did, who would end up paying? Certainly not the union puppet masters, they'd simply step back; it would fall back onto the 'funds' which would come from the members who were the victims in the first place.

The "new adviser entrants" data is wrong. Adviser Ratings had "new entrants" at less than 100 in 2019 in their 2019 Financial Landscape Report. I think the data being quoted are those that were re-authorised on the FAR after being terminated previously. This is moreover indicative of the movements between licensees. And "new entrants" with no experience cannot be compared to those advisers with years of experience. In conclusion, the adviser shortage problem will be even more dire than predicted.

Yep. The data seems dodgy. It appears to reflect movement between licensees, not "new entrants".

Nonetheless, there will never be an adviser shortage if consumer demand declines faster than adviser numbers. The excessive regulatory burden is making professional financial advice far too complex and expensive for most consumers to access. There will be no need for any new advisers at all, while excessive advice regulation is effectively shutting out more and more consumers.

I am gobsmacked by all these comments. Sure, we're being drowned in a bureaucracy that's pricing advice out of the reach of those most in need, but the future opportunities for advisers have never been greater. Increasing demand, diminishing supply.......I like the sound of that!

hello, return adjusted for risk?

I wish you well, and all my fellow advisers who wish to remain the best of luck. what I will say is, very few advisers have thought deeply about the risks embedded in the advice they give. the risks may not manifest for a while but they will in time.

the most astute advisers began leaving since 1 July 2013, up until now more than 7,000 advisers have departed. I will let you think about why highly experienced advisers who know as much as you or more have decided to leave.

clue: it's not because they are lazy and or criminals, and don't want to do a stupid grad dip or fasea exam which most of them would pass quite easily and without studying

best

Pussy

and hopefully a gained reputation that advisors do give independent and professional advice that gives confidence to consumers to engage financial advisors.

you and your ilk are the only ones perpetuating the myth that consumers have no confidence in financial advisers. the opposite is true, informed consumers with experience dealing with financial advisers - those that SHOULD be surveyed for an opinion- give us a very high approval rating, they are normally also in better financial position (directly because of our positive intervention in their financial lives) and also report higher levels of personal satisfaction than others.

that should speak for itself.

The opposite in fact. I know that in general terms, people are impressed with their financial advisors and the service and advice given. But in wider circles including news reporting there is doubt about the financial advice industry and that reflects badly on financial planners.

we are changing that perception of financial planning. soon, all existing financial planners will have either a graduate diploma or a master's degree and will have passed a national exam.

in the future, we will be the most qualified of any profession with the strictest code of ethics and we will thumb our nose at people like you and look down on you, and berate you and humiliate you in public. you understand that right.

for people like me, who already hold a master's degree and have passed the fasea exam that day can't come soon enough.

I wonder if you will be highly critical of Industry Super Funds when they collapse as result of their over allocation to unlisted assets and their dubious related party transactions. They are fake super. This economic downturn has only just started. There is a high probability that this downturn will become an economic depression. As a result, Industry Super Funds will see huge outflows which will finally force transparency into their practices that until now they have been able to keep covered up because Labor's Fair Work Legislation directs the majority of SG inflows into Industry Super Funds. Maybe the regulator will be forced to audit Industry Super Funds so that exhibits of bad behavior can be brought forward about them.

Another who doesn't understand unlisted assets. Is your residence listed on the ASX?

Notice you chickened out of commenting on the myriad of negative articles about the ISA. Too tough to handle? Suppose it is when the actual article is the part criticising union super, makes it difficult for you rather than your cheap pot shots at other comments.

Hedware, in relation to the issues with unlisted assets, my residence is not listed so is it's true value what I can sell it for in a realistic period of time or is it what I believe it is worth? I can get valuations by qualified valuers and the first thing they ask, "what's the valuation for?"
If I'm trying to buy the home from my partner in say a divorce, I get a lower valuation. If my partner is trying to buy it, then I want a higher valuation. It can be done - been there done that. The true worth or the residence is only found is it is sold - all other methods are estimates. All relatively easy when you are only dealing with small residential properties - but I still believe my place is worth $5M - I'm just trying to find the right buyer.
Try valuing a large farm mate or a massive building or piece of Infrastructure - the guess valuation gets harder to define. At some point, these unlisted assets held by many super funds will need to be sold - lets just hope that members all get the value that the trustees (who is paid to produce returns while they are there) on the day it is sold in perhaps twenty years time. In the meantime, plenty of SGC rolling into these funds so that "unlisted residential house" can continue to be valued at $5M as it is not yet being sold. Big conflicts here mate.

Pleased that you understand the reality of unlisted assets. Your analysis of setting a value for your residence is good and that analysis can be equally applied to listed assets that are at the whim on Mr Market (see Buffett).

There is a whole group of professional valuers going about their business throughout the world valuing large scale projects. The owners of these large scale assets want the same approach when it comes to buying and selling (just like you). But if they are not selling their unlisted assets then they want fair value to meet a number of opposing business reasons.

A forced sale of both listed and unlisted assets is not nice, but there's not much difference. Your divorce example is a good one where you are forced to sell an unlisted asset. You invest in listed products then the value of your assets is at the whim of the herd. You invest in unlisted products then the value of your assets is basically at the whim of the buyer.

Personal investors see long term as 7 to 10 years. Superannuation and pension funds have long term at 50-60 years and so unlisted assets makes sense. Mining and oil companies for example have similar long term settings because they have plenty of unlisted assets.

It is surprising that retail superannuation funds dont hold more unlisted assets than they do because they must have long term settings to pay pensions. There's probably ownership, customer and business reasons why they dont. But if you are a young supernnuant, then you would be wanting your fund to last long enough to draw a pension.

We have to give praise to the people running super and pension funds whether the funds are retail or industry. They are responsible for preserving value over a long time with all sorts of potential impacts on the capital reserves and incomings and outgoings. The black swan COVID-19 disease is one they sure didn't want.

Hedware, it looks like your game is finally coming to an end given that the main stream media is now writing articles about overvalued assets in Industry Super Funds. Industry Super Funds have been very successful at gaming the system and a big part of that has been overvaluing unlisted assets to falsely claim a higher return than other funds. This has allowed Industry Super Funds to spin a great investment return story to take advantage of everyday Australians. It is well known, and unfortunate, that the average person makes their investment decisions based on a story, they do not possess the financial skills to analyse the fundamentals of an investment portfolio. Industry Super Funds have taken advantage of this, but karma now has its foot firmly on your throat. The truth always comes to the surface in the end. How the truth emerges depends on how far from reality things have been twisted. In this case, it seems likely the truth will emerge with devastating effects for many innocent people.

Reality - you must have missed this - all asset classes have dropped in value across the world due to the COVID-19 pandemic. Unlisted assets such as houses, infrastructure, precious stones, artworks, goodwill and a lot lot more have dropped in value as well. To think that listed assets will keep their value at this time shows superficial understanding of economic, business and investment conditions.

One of the reasons for investing in unlisted assets to gain a high return in income and capital - that's why the wealthy invest in unlisted assets (ie property). Maybe the unlisted assets held by industry funds did deliver higher returns (but one would think to undervalue unlisted assets to show better performance return) per invested dollar). Easy maths - you should try it.

But unlike you, I dont know about industry super funds and their investments in unlisted assets, I will take your word for it. Who runs Future Fund? Doyens of the private sector - that's right. So they are ok in the Future Fund having a sizeable hand in unlisted assets? Have a look at some of the high end retail super funds and more than many self managed super funds - they invest in unlisted assets - naughty, naughty.

Hedware, you are definitely a master of spin, but your game is coming to an end.
The long-term debt cycle has come to an end. Interest rates are at or near 0%. The last time in history that the world experienced the ending of the long-term debt cycle was the 1930's. There is virtually no capacity to reduce the cost of money to drive another short-term credit expansion for economic growth. As a result, the macro economic outlook is deflation (Warren Buffet isn't massively overweight cash for no reason) and Industry Super Funds are stuck with large unlisted assets that will have to been written down substantially. The members who flee early will be obtaining an unfair advantage over those who remain in the fund. Maybe that is a good reason for not over allocating to unlisted assets. In one sense superannuation funds have long-term commitments but they are also exposed to short-term liquidity risk as members can transfer their money to alternative superannuation funds. I expect a significant rise in SMSF's being established with people leaving industry super funds.

Valuation is only one issue relating to unlisted assets, what about how the super funds classify them in their asset allocations. It's clear from what has happened in this market downturn that the illiquid nature of these assets does make them growth assets. It's time ASIC forced super funds to classify them appropriately so that the general public can make meaningful comparisons between funds. Hostplus is always going to be the best example, the default option really has a growth allocation of 93% but it is compared to other 'Balanced' options within the SR 50 Balanced index that can have a growth allocation as low as 60%. The upper threshold is 76% for the index so Hostplus conveniently play around with the categorisation of their unlisted assets until they can claim a 76% growth allocation. It's ridiculous.

You make a good point Brett H if you are talking about comparisons of relative performance. Unlisted assets do generate income only, capital only or both. Knowing what are the unlisted assets (and how and when they are valued) in super funds would help pin down the comparison issue. There's plenty of others here that know far more about industry funds than I do who be able to provide the unlisted assets held up industry funds, but some cant understand why holding unlisted assets makes good plays.

I am always a bit surprised that the retail funds haven't countered the better performance claims by industry funds. Even in briefings with retail fund managers it is hard to draw a defence or attack from them even with the outflow of funds since the Royal Commission.

It needs to be remembered that active fund managers like valuations and probably like a nice range.

Wider circles? News reporters? Yeah great, let's judge financial planners by the perceptions of people who don't use them and have little understanding of what we do for our clients. Maybe we can also judge your precious industry funds by asking people in Timbuktu or Vladivostok what they think of them while we are at it.

the guy, hedware is a nutter, belongs at choice along with the other nutters

And so continues the rolloercoaster towards providing LESS access to advice to everyday Australians. With only around 100 actual new entrants to the industry (the rest are advisers moving from one license to another), and not many businesses being able to profit in the new world let alone afford to fund professional year programs, it will only shift more towards HNW clients being able to afford advice. The concern here is the accessability of advice, which is a by product of the education changes.

The decreasing numbers of humans becoming advisors won't be an issue with RoboAdvice apps coming into being. These apps will provide 24/7 advice from the home computer; won't take sickies; will pass all exams at 100% pass rate; will have ethics sub-routines built-in; will have low fees due to economies of scale; will sweep continuously for best products and returns; will know and follow the laws; will not bother with infra fund fees; won't need ASIC to supervise; no more weekly notices of an advisor found wanting. But there's more - will not need to lobby politicians with lunches over super fund choices; will not need royal commissions; will not take any notice of Bragg, Wilson and IPA.

Robobanks and Robodoctors exist today and soon will be joined with RoboAdvisors. The new way of financial advice.

Yawn.

Fine for the masses that you probably deal with in your union super, Richard.

Any decent planning firm that deals with higher balance clients already knows what value we bring to the table, as do the clients.

However, will correct you on a couple of things; The lobbying lunches with politicians will continue of course, along with continued corporate box access, first class flights and other bribes that the union super openly flout; also, Bragg, Wilson, Hume & co are focusing their attentions on your little pet, union super so think that will continue for some time to come. Hopefully if Adele Ferguson has any professional ethics she'll follow up her ME Bank piece with some further investigative reporting into all their kickbacks, insane 'unlisted, alternate, other' labelling and asset allocations, union dominating worksites on buildings held 'for members benefits', trustee fees, union 'consultation' fees, conflicted vertically integrated construct, ... geez, I am getting bored already and fingers tired from typing, you know all the other pieces that I have written ad nauseam previously, all the ones you failed to answer a single item but continued to deflect onto banks or retail super or planners.

You are kind of correct with the lunch bit. I don't know about the union largess but I do know about the largess from the other side. Sad that they don't invite you. I agree re ME Bank now that I have learned some more about it. RE ad nauseam - I too have said I have no personal, professional, business interests in anything industry funds - do you take any notice? I like competition and like the industry funds putting pressure on the other side - that's capitalism. Makes for better performance and lower costs. Dont let your ideological position cloud and close your mind to wider investment options.

Of course I dont want RoboAdvisor. I have continuously argued for independent professional financial advisors. Just thought I would stir the red mist. Mission accomplished.

I like how you called hedware, Richard. I like the shorter version of Richard, Dick. Dickhedware has a nice ring to it and befitting this man exhibiting tiny man syndrome.

a lot of guff for someone working on the telephone at industry super fund on no more than $70k pa inclusive of super

ad hominem to you

whatever, $70k inclusive of super, telephone call centre operator. don't you have a second job to go to and fill shelves at coles.

leave financial planning to professionals. people like me masters qualified with an easy first-time pass of the fasea exam

you belong at coles dickhedware.

Tu quoque to you, especially when you deflect arguments against your precious ISA corruption with faults with retail, planners, banks (yawn)

Hedware, stop peddling this snake oil roboadvice crap here. The recent market moves have PROVEN people want a person to talk to, not a robot. A robot is only programmed by a human, humans with faults, don't you get that? Maybe you should dust off the space odyssey for some further research, get HAL 9000 to look after your portfolio, good luck with it. If roboadvice is the way of the world, why do you hang around here all day commenting on human planning issues?

Hedware, if Robo Advice is expected to be perfect, then if two providers existed and assuming they are both perfect, then the same advice would be produced by both, rendering one provider obsolete. If you were a betting type, I would place my bet with Six Park. I believe they have a Board member by the name of Danielle Press, who also I believe happens to be the same ASIC Commissioner.

If this is the case, how do you get the conflict out of that?

Unless the laws around Roboadvice are different to personal advice, I wonder if Roboadvice will be viable. Often a chance remark by a client makes a significant difference. Roboforms will probably miss something and then the client will be affected and it's all over. So does anyone know if Roboadvice obeys the same regualtions, or do they have special "get out of jail" clause.

Great query; wasn't there a roboadvice firm that faced all sorts of difficulties and ASIC forced it to close down either in 2018 or 2019? Vaguely recall a little story briefly popping up somewhere. Mike, can you answer at all please?

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